The value for money assessment builds on the strategic assessment. The term "value for money" is used to describe the difference in risk-adjusted cost to The City between traditional procurement and P3 procurement. The premise of value for money assessment is that by including the cost of all risks to The City under each model, they can be compared on a financial basis to determine the optimum approach2. However, the value for money results should be considered alongside the strategic findings, because while the value for money approach is a highly illustrative tool, it is not perfect and should not be considered in isolation. The value for money assessment will be one of the main indicators used to determine if the project should proceed as a P3. As such, it is extremely important that it be done carefully and as objectively and transparently as possible as there is significant potential for this to become a politically sensitive issue.
The value for money assessment should be based on the best available cost estimates, and may warrant some additional engineering, architectural, and costing work depending on the state of the project's estimates. The need to improve upon existing estimates must be examined on a case-by-case basis, but ideally the project would have been life cycle costed at the preliminary design level or better. However, caution should be exercised in over-advancing project designs, because design costs can be made partially or fully redundant if a project proceeds as a P3. More detail regarding the methodology for a value for money assessment can be found in Schedule 3.
Value may not necessarily mean a savings in cost over traditional procurement; cost savings are just one of the factors to be considered when determining an appropriate delivery model. Non-cost factors such as increased quality or reliability may be equally important in the assessment of value. As well, differences in the social and environmental impacts of the project as a P3, relative to traditional delivery, need to be considered. In this way, a Triple Bottom Line approach to the value-for-money comparison can be taken.
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2 For additional information on the process for quantifying project risks, refer to Section 3.6 - Risk Assessment and Quantification